The Current Yield Tends to Overstate a Bond's Total Return

question 81

Multiple Choice

The current yield tends to overstate a bond's total return when the bond sells for a premium because:

• A) the bond's price will decline each year.
• B) coupon payments can change at any time.
• C) bonds selling for a premium have low default risk.
• D) taxes must be paid on the current yield.

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Definitions:

Market Share

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Motion To Dismiss

In a civil case, a request by the defendant that asks a judge or a court to dismiss the case because even if all the allegations are true, the plaintiff is not entitled to any legal relief. Also called demurrer.

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Identical Product

A product that is exactly the same in every characteristic and feature as another product.